Today you can see the word cryptocurrency flashing everywhere. Everyone is talking about it. The guy who was considered dumb a month ago, has today become a celebrity in the school. All because he had invested in Bitcoin a year ago and today he owns his own car. I am sure you must have heard instances like this.
So today I would be telling you about What is a cryptocurrency and Why is considered the future.
"A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets." This is the definition provided by Wikipedia to it. However I feel that cyrptocurrencies are much more powerful than just facilitating trade and transactions. They are a virtual entity so powerful that it could single-handedly restrict any government to lose control over its currencies. That's why so many government like China,Russia,India are cracking down the exchanges that facilitate the trade of these currencies.
The next obvious question is how can a cryptocurrency affect the any government. For that we have to dive in some of the economics that it behind it.
What is money ???
Money is something that can used a medium of exchange for goods and services. It can be in the form of paper, coins or nowadays virtual that is cryptocurrencies. Until 1970’s the currencies like US dollar could be exchanged for real gold from the government. In other words, the currency issued by the US government had a underling value of gold for which it could be exchanged. However after 1970, this is also not possible. So all the currencies are backed only by the promise of the government that it would pay so much to the bearer of the paper currency. Thus all the money you have is based on the promise that my government would pay the person holding the dollar bill. Now Imagine all the cash you are holding could be useless if the government stops accepting it tomorrow. This gives the ultimate power of controlling the currency circulation to the government. The ultimate goal of any currency is its acceptability and it's market cap (for virtual currencies).
Now ,here is where the cryptocurrencies came into the picture. Cryptocurrencies today are using one of the finest technologies available and making the transfer of money faster and safer .Like any other currency it's value it also determined by the demand and the supply of the currency. However like the legal tender, these currencies cant be controlled by the government.The rise of these virtual currencies in the market cap (which is breaking records almost every week) and acceptability are surely challenging the authority of the governments.
Like any other thing ,the future of the currencies is digital that is cryptocurrencies but I am not sure which one of the cyrptocurrencies it is going to be.
Feel free to comment if you disagree on something so that we could discuss it further